look news india
Mumbai: Experts and the banking sector believe that the possibility of interest rate cut in the country has once again increased due to the inflation rate in the coming month of September. Inflation reached a nine-month high of 5.49 percent in September due to rising food prices. In August this rate was 3.65 percent. The possibility of repo rate cut in 2024 has reduced.
In its October meeting, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to change its policy stance from housing retreat to neutral, following which a repo rate cut was expected in December, which is now Doesn't seem to be materializing. Citibank said in a statement.
It would not be surprising if the interest rate cut is now extended till April 2025. In the MPC meeting held earlier this month, the repo rate was maintained at 6.50 percent for the tenth consecutive time.
Food inflation increased to 9.24 percent in September from 5.66 percent in August. One banker said overall inflation will remain high as a result of higher food prices, which will act as a buffer against interest rate cuts.
JP Morgan said that the Reserve Bank will not cut the repo rate until there is a strong indication that the retail inflation rate is moving towards the target of four percent.
Speaking to reporters after last week's monetary policy meeting, Reserve Bank Governor Shaktikanta Das made a statement indicating that inflation should be closely monitored. The governor also said adverse weather conditions, geopolitical friction and a resurgence in crude oil prices pose significant upside risks. Central banks will face broader challenges in formulating inflation-oriented monetary policy due to climate change.
Climate-related supply shocks such as food and energy shortages and productivity losses will increase inflation volatility.
He further said that the losses incurred by companies and individuals due to frequent natural disasters could lead to a decline in demand. These shocks could weaken financial institutions and banks, limiting credit flows into the country, Patrani was quoted as saying in a speech posted on the Reserve Bank's website.
This level has remained constant since the repo rate was increased from 6.25 percent to 6.50 percent in the February 2023 meeting.
The target of four percent inflation rate will be seen in the next financial year.
Mumbai: According to Reserve Bank of India (RBI) Deputy Governor Michael D, retail inflation in the country is expected to be seen at the long-term target level of four per cent in the financial year 2025-26. Patra said.
Inflation was seen below the target level in July and August of 2024. Inflation is expected to average 4.50 per cent in the current financial year before rising to four per cent in the longer term in financial year 2025-26.
India's experience with inflation has been somewhat different due to frequent shocks in food and fuel prices. Consumerism and fuel price shocks continue to challenge monetary policy.
Price stability in India is a shared responsibility. The government sets the inflation target while the Reserve Bank works to achieve it.